Are you kidding me? Have you seen Green Mortgages being advertised anywhere? I just saw an ad for them today in a magazine I was reading. I won’t mention what publication nor the company but I will not recommend either to people I know based on their message of using a green mortgage to buy a bigger home.
Ok, as the mortgage and real estate industries hit bottom, mortgage companies that are still around are clamoring for more customers. As a result we’re likely to see poorly thought out advertising schemes like this one I titled my article with. I’ll say it again: “Get A Green Mortgage And You Can Buy A Bigger Home” is an advertising slogan that anyone looking for a home purchase mortgage or refinance should run from. I’m here to say, don’t fall for it.
Green Mortgages Are Not New
Green mortgages have been around since 1979. These mortgages for the most part have gone under the radar as home equity loans and cash out refinances have made it easy to get money for home improvements and paying down debt. With the recent mortgage industry crash, home equity lines are tougher than ever to get and cash out refinances have largely been trimmed down to those highest qualified with their credit, income and equity.
See: Discover The Real Differences Of A Green Mortgage for more information on Green Mortgages – what they are and how a home buyer or home owner can use them.
Energy Efficient Mortgages – Green Mortgages Encourage Buying Up
You can use an EEM mortgage to either purchase a home or to refinance your current mortgage. In either case, the EEM provides money to purchase and install energy efficient appliances and other property upgrades all in an effort to save the home owner money on their monthly utility bills.
One of the qualifying factors with an Energy Efficient Mortgage – EEM - is that the loan calculates an estimated monthly utility savings from installing energy efficient upgrades into your property. As such, the mathematics of qualifying for this loan allows those savings to be subtracted from a proposed mortgage payment. With a lower payment as a result of this calculation, the borrower can borrow a larger amount of money. In a purchase situation this translates into a homebuyer being able to buy a bigger home.
Have We Not Learned Our Lesson From Our Past Borrowing And Lending Ways?
In the mortgage and real estate run up in 2005-2006, all kinds of home buyers and home owners were promised refinancing options later if they took a high risk mortgage. What happened to many of these people is that their opportunity to refinance dried up and they got stuck with a payment they couldn’t afford. Consequently, hundreds of thousands of homeowners have simply, but painfully, stepped away from their dreams of homeownership. Do not let this happen again, or to you.
What happened to saving money? What happened to buying within your means? Is it really a good idea to put you into the path of a higher priced house on the promise of lower utility bill payments in the future? I say, no – this is not a good idea. If you go in the direction of a higher priced house using a Green Mortgage based on the promise of lower utility payments then you haven’t been paying attention to the mortgage news for the past 2 years.
Advertising Green Mortgages As A Way To Buy A More Expensive Home Should Be Criminal
Green Mortgages are great mortgages for what they provide: money to make energy efficient upgrades to your home. They are not supposed to provide a way to buy a more expensive home. The marketing of these mortgages that ties them to affording a larger home is faulty and shouldn’t be allowed. To me it borders on being criminal and misleading.
Stick to your budget and take the savings that a EEM offers. Who knows what energy prices are going to do in the future other than to go up. No matter what kind of energy improvements you make to your property using an EEM eventually energy price increases will exceed your savings.
If you push your mortgage payment by being encouraged to do so by a mortgage company to the limit “because you can” and energy prices go up enough making your budget too tight for reality what are you going to do then? You aren’t going to be any better off than the numerous home owners who are losing their homes to foreclosure because they can’t afford their higher house expense.
You don’t have to take a more expensive house as this mortgage program suggests you can. Stick with a more sensible mortgage payment and take the savings. Do something with like – put it into your retirement account or college savings plan for your kid. Save it for when you really need it.
If you want more information on green mortgages please ask EdGAR.
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